Information Services Group Inc (III) 2017 Q1 法說會逐字稿

Good day, everyone, and welcome to the Information Services Group First Quarter 2017 Financial Results Conference Call. Today's conference is being recorded, and a replay will be available on ISG's website within 24 hours.

At this time, for opening remarks and introductions, I'd like to turn the conference over to Mr. Barry Holt. Please go ahead, sir.

Thank you, operator. Hello, and good morning. My name is Barry Holt. I'm a Senior Communications Executive at ISG. I'd like to welcome everyone to ISG's First Quarter Conference Call. I'm joined today by Michael Connors, Chairman and Chief Executive Officer; and David Berger, Executive Vice President and Chief Financial Officer.

Before we begin, I'd like to read a forward-looking statement. It is important to note that this communication may contain forward-looking statements, which represent the current expectations and beliefs of the management of ISG concerning future events and their potential effects. These statements are not guarantees of future results and are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated.

For a more detailed listing of the risks and other factors that could affect future results, please refer to the forward-looking statement contained in our Form 8-K that was furnished yesterday to the SEC and the Risk Factors section on ISG's Form 10-K covering full-year results. You should also read ISG's annual report on Form 10-K for the fiscal year ending December 31, 2016, and any other relevant documents, including any amendments or supplements to these documents filed with the SEC. You will be able to obtain free copies of any of ISG's SEC filings on either ISG's website at www.isg-one.com or the SEC's website at www.sec.gov.

ISG undertakes no obligation to update or revise any forward-looking statement to reflect subsequent events or circumstances.

During this call, we will discuss certain non-GAAP financial measures, which ISG believes improves the comparability of the company's financial results between periods and provides for greater transparency of key measures used to evaluate the company's performance. The non-GAAP measures which we will touch on today include adjusted EBITDA, adjusted net earnings and the presentation of selected financial data on a constant currency basis. Non-GAAP measures are provided as additional information and should not be considered in isolation or as a result -- or as a substitute for financial results prepared in accordance with GAAP. For the reconciliation of all non-GAAP measures presented to the most closely applicable GAAP measure, please refer to our current report on Form 8-K, which was filed yesterday with the SEC.

And now I'd like to turn the call over to Michael Connors, who will be followed by David Berger. Mike?

Thank you, Barry, and good morning, everyone. Today, we will review our first quarter results and brief you on our key operating and client highlights. Let me begin by saying that our excellent first quarter results, our growing pipeline of new business opportunities and our investments in the business are positioning us well to deliver on our financial objectives. We are off to an excellent start, marked by record-setting first quarter revenues and adjusted EBITDA that was more than double the prior year. Our fast start was built on solid demand in the marketplace for our Digital Advisory Services, including Robotic Process Automation or RPA, along with our network advisory services and an acceleration of our recurring revenue offerings. Increasingly, we are top of mind for our clients as they look to capitalize on the growth and cost savings opportunities brought about by the digital revolution. Our strategy is working, and we are executing with excellence.

Europe returned to double-digit growth in the quarter, as the U.K. stabilized and Germany grew by more than 30%. Coupled with the robust demand in the U.S., we are operating at full throttle. Let me take a few moments now to update you on the progress we have made on the 5 focus areas we discussed on our last call.

First, combining with our firm -- combining our firm with Alsbridge. As you know, the combination we announced in December enabled us to expand our portfolio of services, including adding automation to our digital offerings and network services. The demand for our expanded services is reflected in our strong first quarter results. This is the first indication of what we expect will be a real step change in our financial performance in 2017. I'm pleased to report that our integration essentially is complete, and we're going to market as one ISG. We are working together as a global team to aggressively capitalize on our cross-selling opportunities, and those efforts are beginning to bear fruit. We are now one fully-integrated firm.

Second, expanding our recurring revenue services and positioning for much more. Our recurring revenues reached our highest quarterly level ever at $19 million in Q1, up 39%. The growth was driven by new, expanded, recurring offerings during the quarter, including what we called [BAAS] or benchmarking as a subscription, and our own version of [SaaS] or Software as a Subscription offering with our RPA business. In addition, both our research and managed services continue to expand. Our goal, as we outlined to you on our last call, is to have $100 million of recurring revenues within the next 3 years. This quarter, certainly trends towards achieving or exceeding our target.

Third, becoming the must-use firm for clients for participating in the digital enterprise revolution. Our expanded portfolio of Digital Advisory Services, especially the added strength we now have in the hottest area of the industry RPA are positioning us extremely well to take advantage of growing client demand for all things digital. In the first quarter, we expanded our digital services and solutions to clients and as a result, digital services now represents more than 30% of our Q1 revenues. And more than half of our engagements now include a digital component. And both numbers are expected to climb.

One indication of our strength in RPA came when we were named a certified business partner of Blue Prism, a top automation software provider to help clients transform their businesses through RPA. We also hosted an RPA conference in April that drew record attendance and resulted in several new business opportunities. Interest in leveraging RPA to automate IT and business processes is soaring. The RPA market is expected to grow more -- to more than $5 billion by 2020, up from only $180 million a few years ago.

Our thought leadership in the digital space also continues to expand. Last week, we announced the results of the latest ISG Automation Index, which showed 72% of companies who use RPA by 2019 to automate support functions. That report also found that the application of RPA is enabling enterprises to execute businesses processes 5x to 10x faster, with an average of 37% fewer resources. Earlier, ISG published a report on HR technology, which showed that more than half of all enterprises will rely on cloud-based or hybrid solutions for their human resource systems by 2020. And that's more than double the number that do today.

Fourth, turning our portfolio of non-core, marginally-profitable services. This included closing our China operations in Q4, which will eliminate a bit under $2 million of revenue this year and eliminating certain sourcing services that were not meeting nor expected to meet our margin thresholds. We modeled the cannibalization of sourcing services revenue, resulting from the combination with Alsbridge, and have already planned for it accordingly.

Fifth, weathering the U.K. softness, driven, we believe, by uncertainty over Brexit. The U.K. business stabilized in Q1 as we anticipated and, in fact, grew by 3%, driven by digital, including RPA demand. Sequentially, the U.K. was up 11% from the fourth quarter.

Now turning to our financial performance for Q1, revenues were $67 million, up 35% versus the prior year in constant currency. As is customary for ISG, I'll focus on constant-currency growth throughout the call. We had a strong revenue growth in the Americas, up 58% and in EMEA, up 11%, with Asia-Pacific basically flat. Q1 adjusted EBITDA of $7 million was up more than double what we reported in Q4 as well as in prior year. And our cash balance at quarter end was $33 million. During Q1, we served 435 clients, up 39% from the prior year, the result of both organic expansion of clients and the Alsbridge acquisition. ISG remains the go-to firm in our areas of expertise, including digital services, sourcing management and much more.

Turning to our regions. In the Americas, our 58% growth in the first quarter was fueled by the strong demand for digital, including RPA as well as for our network services and our growing, recurring revenue services. We launched benchmarking as a subscription and software as a subscription and saw our research and managed service businesses continue to expand. In our industry segments, we saw especially good growth during the quarter in our manufacturing, technology and retail verticals. Key client engagements in the quarter included a Depository Trust and Clearing Corporation, or DTCC, TSYS, which is Total System Services, a credit card issuer, Hertz, McDonald's, Entergy and the State of Michigan.

During the quarter, our inaugural 2017 executive provider Summit, developed and produce by our new ISG Events business launched last year, was a resounding success. It was our first ever $1 million-plus revenue event for ISG. In our public sector business, the University of Oklahoma Health Sciences Center has awarded ISG a contract to guide the center through enterprise system assessment and discovery and manage their RFP process. This is about $1 million contract award. As an example of our RPA work during the quarter, we signed a contract to provide over $1 million in services and software subscriptions, with a large New York-headquartered bank to begin their robotic process automations. And in our Network Services business, we are working with the Canadian automotive parts suppliers to review the client's global wide area network technology and sourcing strategy, as well as the commercial assessment and savings to review their telecom contracts. We also won a network services engagement with a leading U.S. health insurance company, a client of legacy ISG. We are working with them to develop a network strategy and risk mitigation plan for their contact center environment as well as a review of platform alternatives including cloud-based solutions. We are also assessing their annual software spend to identify savings opportunities through renegotiation and other sourcing strategies.

Turning to Europe. Revenues were up 11% in the quarter. Our U.K. operation stabilized and appears to be moving past the Brexit uncertainty of the back half of last year. The U.K. reported 3% growth in the quarter and was up 11% over Q4. Our DACH region, led by Germany, reported very strong double-digit growth for the quarter, led by digital and sourcing services. Key client engagements in Europe in the quarter included BASF, Commerzbank, ABB, Volkswagen, Vattenfall, the U.K. Ministry of Defense, Shell and BNP Paribas. In Germany, we signed a multimillion euro contract with a leading global chemical company to support its end-to-end enterprise DevOps transformation program. DevOps is a fast-track way of developing software applications, while also automating software delivery and maintenance. During this 2-year assignment, ISG will be advising, shaping and supporting this client's large digital transformation program, including running their transformation management office. It is one of the largest enterprise DevOps transformations currently taking place in Europe.

ISG has also signed a significant contract in the DACH region that extends our work with a global leader in digitally connected and enable industrial equipment and systems for utility, industry, transport and infrastructure companies. The contract expands ISG support for the information services stream of a corporate-wide productivity program. The program aims to achieve multimillion-dollar savings in application management and support services and extends ISG's work to include project management office services.

In Asia-Pacific, our first quarter revenues were essentially flat, with good growth in the banking, financial services and insurance verticals. Key clients in the region included Optus, which is the second largest telecom company in Australia, Fonterra Co-operative Group, which is a New Zealand, multinational dairy co-op, Westpac and the Australian Department of Immigration and Border Protection.

We are especially pleased to report that ANZ signed its largest engagement ever, a multimillion-dollar, multiyear contract with a large global logistics company. The client is undergoing a total business and technology transformation program, valued at $1 billion, with extensive operational efficiencies to be gained through consolidation and a refresh strategy of technology. ISG will begin this work during the second quarter.

In our continuing drive for recurring revenues, we generated over $19 million of these more predictable revenues streams in the first quarter, and that's up 39% year-over-year. As previously mentioned, our new target is to achieve a $100 million in recurring revenues in the next 3 years.

So with that, let me turn the call over to David Berger, who will summarize our financial results.

Thanks, Mike, and good morning, everyone. First quarter revenues were $66.6 million compared with $49.9 million in the prior year, which was an increase of 35% in constant currency and 33% on a reported basis. Revenues were $41.1 million in the Americas, up 58% from the same period in 2016; $20.2 million in Europe, up 11%; and $5.2 million in Asia-Pacific, which was essentially flat with growth rates reported here in constant currency.

First quarter 2017 adjusted EBITDA was $7 million. This compared with $3.3 million in last year's first quarter. This result was driven by the increase in revenues. As a reminder, last year's first quarter was negatively impacted by $400,000 in costs associated with our stock tender offer. We reported operating income of $1.2 million for the first quarter of 2017. This compares with operating income of $100,000 in the first quarter of 2016. Included in the first quarter 2017 operating income was an additional $500,000 in stock compensation versus the prior year. The net loss for the first quarter was $600,000 compared with a net loss of $700,000 in the first quarter of 2016. Reported fully diluted loss per share was $0.01, compared with fully diluted loss per share of $0.02 for the same period in 2016. Adjusted net income for the first quarter was $2.7 million or $0.06 per share on a diluted basis compared with adjusted net income of $1.3 million or $0.04 per share on a diluted basis in the prior year's first quarter.

Utilization for the quarter was approximately 67% versus 59% in Q4. Quarter-end headcount was 1,240. Our balance sheet continues to have the strength and flexibility to support our business over the long term. Net cash provided by operations for the quarter was $2.3 million. We invested $879,000 in capital expenditures and repurchased $1.2 million in shares. On the balance sheet, we ended the quarter with $33.2 million in cash and total debt outstanding of $123.9 million. Our average borrowing rate for the quarter was 4.5%. And we had 43 million shares outstanding as of April 28.

Mike will now share concluding remarks before we go to Q&A.

Thank you, David. So let me summarize. We had an excellent start to the year, putting us solidly on the path to achieving our 2017 financial guidance. We had record first quarter revenues of $67 million, up 35%; EBITDA of $7 million, more than double the prior year, with an EBITDA margin of 10.5%; and our cash balance remains strong at $33 million.

Our digital services continue to grow, now representing over 30% of ISG revenues in the quarter, up from 20% in Q4, with automation services helping to accelerate our growth. Our expanding, recurring revenue streams are also accelerating our growth as we reached $19 million of these in Q1, by far our best ever quarter. And our integration of Alsbridge is essentially complete, and we remain on target to deliver our synergy savings. As always, we are focused on creating shareholder value for the long-term. I'm optimistic about our 2017 prospects and our ability to progress our long-term strategy. We believe the equity market will realize the significant value we are creating as a firm.

Thanks very much for calling in this morning. And now let me turn the session over to the operator for your questions.

(Operator Instructions) And we'll take our first question from Vincent Colicchio with Barrington Research.

So to be sure, you're reiterating your prior financial guidance. Is that correct?

That's correct.

Okay. And then, in terms of U.K., due to Brexit, you had said that several projects were delayed and your folks are still on-site, which gave you confidence to -- that the projects would get restarted. So I'm just curious, what portion of the sort of -- if you can come up with some -- such a number, of those delayed projects are looking like they're going to come back?

So I think, let me start with our premise for the year. Our assumption and our providing guidance is that the U.K. would stabilize in 2017. So what did we see in Q1? What we saw is a pickup of some shorter term projects that were on kind of pause. So the emphasis around digital and our Robotic Process Automation picked up during Q1, which is really what drove some of our revenue increase, which was up 3% in the quarter and 11% sequentially over Q4.

So I don't have a quantifiable number other than to say we see some sparks currently in the U.K, that the hesitation during the back half of the year now that -- as of March, they've actually given their kind of 2-year notice, so to speak. We are beginning to see some movement in the U.K. But we'll remain cautious, but we're optimistic that our assumption for the year is accurate. And there may be upside if the U.K. can progress as it did in Q1.

Okay. And then, in terms of your recurring revenue, it looks like a nice tick up there. Do you expect that to continue to grow sequentially for the balance of the year?

So our recurring revenues, we think -- I think if we go back to last year, we estimated that we would grow our recurring revenues from $60 million to roughly $70 million in 2017; that was the -- kind of the guidance that we gave. Clearly, with $19 million in Q1, we are on track to meet or exceed that number. But we had a very strong quarter, because we launched benchmarking as a service. And we launched what we're calling our software -- sorry, Benchmarking as a Subscription. And we also launched our -- what we are calling our [SaaS], which is Software as a Subscription, by pushing RPA out in the market.

So I don't want to talk about sequential, but I will talk about that the growth rate are recurring. We anticipate being at or above the levels that we gave guidance on, which was $70 million over the $60 million that we did a year ago.

And then, the strength you're seeing in the German region. Is that something you expect to continue? In terms of new opportunities, what's the pipeline look like there?

So the pipeline in Germany looks very good. They were up 30% in the quarter. We nailed a number of new projects there. We have a very strong position in Germany. And we do expect Germany to be very strong again in Q2, based on the demand in the pipeline. So that serves us well for Europe, because if U.K. can stay stabilized or better, then -- you know, we have a long history of double-digit growth in Europe and it showed that with 11% this quarter. So we think that with those kind of elements, we should be in good shape for Europe for the year.

And next we'll go to Sarkis Sherbetchyan with B. Riley and Company.

So first, one thing that really stuck out from the press release was that more than 30% of your revenues in the quarter were from RPA. Can you talk about that a little because that amounts to maybe about $20 million or so?

Yes. I think you should look at that -- I think we said digital services including RPA was 30%. So it's not just RPA. It's our digital service offerings, including our new Robotics Process Automation. So when you add the 2 together, yes, 30% of the $67 million is going to give you whatever that -- around $20 million of digital services which includes RPA. So as we've been saying during the back half of last year, our revenue grew to about 20%, that was digital. We've now added an automation component during Q1, which is adding to our digital capability in terms of our offerings with our clients. So, yes, overall, it's nearing $20 million in the quarter of our digital offerings, which includes RPA. So that demand, as we've been talking about for a few quarters, has been picking up steam. We've gone from 5% digital to 10% to the back half last year of 20%. And we're now seeing 30%. And the pipeline is quite strong on all things digital, which includes RPA.

Also, with regards to the Americas, obviously, some of that growth includes the inorganic piece from Alsbridge. Is it possible to parse out what was kind of the organic legacy growth versus what you've added?

No. But I will say, our target -- because we fully integrated the company -- but I will say that our target this year in our guidance was to have a high single-digit organic growth and to win all of the business that we brought over from Alsbridge, minus China that we closed and minus our cannibalization that we built into the model, which was around $5 million, $6 million, I think it was. So you can assume in the quarter that our organic growth on the overall business was high single digits, in addition to we had to win all of that business in the quarter, because the only thing we have on recurring starting the year was our recurring revenue streams at a $60 million annualized basis. So we start the quarter, if you will, at $15 million. So we had to go find the extra $50 million.

So you should look at it also that we are now cross-selling Alsbridge services into ISG clients. And I think I gave a couple of examples during my opening presentation of how we've taken RPA network services into ISG clients and, by the way, vice versa into the unique clients that Alsbridge has, taking our digital and our sourcing services into theirs. So that's why you seeing the kind of growth rate that we see in Q1 and that we have in terms of our overall guidance for the year.

Good. And then with respect to the recurring revenues. I mean, you kind of mentioned the $19 million for Q1. That's pretty solid metric there. I guess, are you seeing a margin uplift as you start to layer in more and more of that type of revenue profile?

Yes. I mean, there was a few startups in some of the recurring revenues, for example, in managed services, just as a reminder, that when we signed new managed services contracts, it's usually kind of mid-single-digit margins year 1; but year 2 onwards, they get up into the high teens. I would say the same thing when we launched -- as we prepared and launched out our new Benchmarking as a Subscription, or [BAAS], as we call it. There was some prep work and some expense and so on. But those businesses all will be higher margin than kind of the overall business. And I think you saw a bit of that with our 10.5% EBITDA margin in Q1 is reflecting a bit of our new product mix.

That's very helpful. Just to come back home on the annual guidance. I think most people kind of want to make sure that the range is still intact. I think for revenues, it was a range of $270 million to $290 million and for EBITDA it was $33.5 million to $36.5 million. Why not include it in the press release, right?

Well, we don't include it every quarter. But, yes, as I said in my script, everything is confirmed -- we've reaffirmed both of those numbers.

Perfect. And then with regards to just the fact you've gone the integration through, do you see any seasonality as the year kind of plays out from the top line perspective?

Yes. I mean the seasonality that you've seen in prior years will continue. So the second quarter tends to be a stronger quarter than the first quarter from a revenue perspective.

And our next question will go to Allen Klee with Sidoti & Company.

The RPA was beneficial in stabilizing, slightly improving -- actually, more than slightly improving the U.K. Could you give us some examples of kind of what was done in robotics that caused that?

I'll give you an example. So the U.K. has, I believe it's 14 policing departments in the U.K. And one of the things we are working with them on and think about this is their ticketing process. So think about the police in the U.K. giving you a written ticket; that ticket goes to a data entry operator; the data entry operator enters the data, can't read what's been written; goes back to the officer for clarification; the officer changes it, cleans it up, gives it back to the data-entry officer, et cetera, et cetera. We are helping them with robotics, if you will, in the policing area, as one example.

We also have billing systems, customer care, account information; that is, some back office, some work with a few clients in the U.K. as well. We've also started looking at a major telecom company based in the U.K., working with them to transform a substantial part in automating their shared service center.

So those are some examples of what I would consider movement in the market there, because they can get kind of, almost immediate ROI. And when I say immediate, kind of over a 3 or 4 month period as opposed to 12 months or longer in some of the major transformations. We see that our digital and our RPA offerings are allowing us to kind of turbocharge that market as things get more stabilized in the U.K. and people begin to spend more money on more major transformation projects.

So, Alan, hopefully that's a couple of examples of how we go about our work and what's beginning to turbocharge over in the U.K. for us.

Okay. Great. And then just another one on RPA. Any examples anywhere of success in the insurance claim processing or underwriting areas?

Yes. So we are doing work for actually several insurance companies. They are a prime target as are banks. I mentioned an example of the bank in New York City; very, very top-tier bank, where we are beginning to process with them on automations. Insurance is the same thing around claims processing. So a number of them are moving. And I would call it early-stage automation of claims processing.

So, yes, insurance sector, the financial sector, health services, utilities are all right now prime examples of automation occurring among some of our clients.

And next we'll go to Marco Rodriguez with Stonegate Capital Markets.

I wanted to talk a little bit more about digital services and RPA. Is RPA the main driver there for the growth you're seeing right now in digital services?

No. I mean, it is a competent of -- and I don't want to overplay Robotics Process Automation. But it is going to be growing very rapidly. In Q1, I would say our overall digital services were dramatically greater than our RPA, if you will. But, remember, we had no RPA a year ago. So everything is incremental on the robotics, and the digital is just continuing to expand. So I wouldn't say it overshadowed the digital at all. It is a subset of our digital offerings, not the majority of.

Gotcha. And can you maybe rank the top 3 of the main drivers there that you're seeing strengthening for digital services?

Well, first of all, almost everyone is looking for now a digital solution and it might be a mobile solution. I can think of a large transportation company that if you think about -- you walk into rent a vehicle, you see all the counters, you see all the people. Think about how you can automate all of that, think about how you can automate walking into a hotel lobby where you have a reservation desk with a number of reservation -- or client representatives behind the counter; think about automating that. Think about a fast food restaurant based in Chicago that's the largest fast food restaurant in the world, and think about automating the front end of their environment and what that might mean.

So there's a number of automations that are in its early stages because this is still quite new. But it varies and it's across multiple industries. And because we support 23 different industry segments, we've got a pretty good view of those markets and what might be possible in terms of kind of participating in the digitization of their businesses.

Got it. That's helpful. And would you say that the demand for the digital services are being driven more by the end customer? Or are you kind of helping push that agenda as well, if you will?

Well, I think it's a combination. This one also is an education. Most all the clients we're dealing with, it's a first-time automation for them. So first you have to go through a bit of an education process. But we've created what we think is a nice proprietary proof of concept, or a POC, that we could go in and approximately in 2 weeks' time show them how a process could be automated at their particular environment. And so in a couple of weeks, you can get a real good feel as to how this can help transform your environment. So that's kind of the approach we have taken.

So we go from proof of concept, then right into helping them think about and select software and then help them with implementation and training. That's kind of the process points.

Got you. And are you seeing particular strengths on your digital services in one of the particular geographic areas? Or is it broad-based?

Well, we saw it both in the U.S. and in Europe. Part of the European drivers, both in the U.K. and in Germany is our overall digital services that continue to expand. So we see the demand there. It's just, just beginning in Australia. And I would say Asia lags the rest of it.

Got you. And last quick question. And I'll jump back in the queue. Just coming -- circling back around on the U.K. and I guess the stabilization from Brexit there. Are you -- did you see, I guess, additional strength or continued stabilization, if you will, for the first month or so here in the second quarter?

Yes. I mean, we see -- knock on wood here. I think what we said is we plan for stabilization. And if we can grow the U.K, it will be a plus. We grew it 3% in Q1. And at the moment the demand looks like growth could continue into Q2.

And next we'll go to Ben Klieve with NOBLE Capital Markets.

Couple -- just quick questions for you guys. First of all, regarding recurring revenues during the quarter. I know Alsbridge's brought in kind of minimal revenues -- minimal levels of recurring revenues. And I guess I'm curious what efforts you've undertaken to develop this, either with their legacy customers or with their legacy services? And you know, if you've seen any progress there? Or if that's just kind of an ongoing goal of yours that really hasn't been taken foot yet?

So a couple of things here for recurring revenue. It was kind of 4 drivers of the growth in the quarter. One is our research offerings, which are subscription offerings, continue to expand. Our clients want complementary knowledge from a trusted source. So in addition to other sources, they may secure research from -- or emerging technology research, in particular, has become even more important for our client base. So research continues to grow. Managed services where we're managing on behalf of the supplier -- of the client's supplier contracts, also grew in the quarter.

And then the 2 areas that we expanded was we launched benchmarking as a subscription, using the platform, that software platform that Alsbridge had in order to leverage it out to use it as a subscription model. And so that was launched in Q1. And then, also, our robotics, where we also have license subscriptions. By adding that into our digital offerings, we have what we are calling our software as a subscription recurring revenue streams where the licenses for 1, 2 or 3 years in length. And that also got kicked off in ISG during Q1.

So the 4 elements together is what drove our highest ever, if you will, $19 million of recurring in the quarter.

And one other question regarding Europe. Is it fair to say that your comments regarding kind of some of the smaller projects that are starting to take off, is it fair to say that, that seems to be kind of an early indicator of growth coming from that region? And then, kind of follow up on that, then, is you described earlier in the Q&A that some of the larger projects continue to be delayed. Do you have any sense of what the catalyst are that your clients are looking for that will give them confidence in really starting those bigger projects?

So first on the smaller ones. Yes, I believe that was a catalyst in Q1 because the ROI is faster. And so they're more receptive to moving now. I think on some of the larger transformations in the U.K -- by the way, there is no pause in Germany. But in the U.K., I just think that a number of clients including the retail segment as well as the financial services segment are still kind of plotting their thinking and their planning on what does this look like kind of post-euro zone. And I think once they kind of settle in on that, we should begin to see some of these projects take hold, and you'll see that in the growth in the U.K. market. And it possibly could occur, frankly, in Q2, based on the demand that we are seeing. But, again, we are going to remain cautious on that. But I will say we are pleased with the stabilization and now the early growth in the U.K, and it looks very promising in Q2 as well.

And I show we have no further questions. I'll turn the call over to management for any additional comments or closing remarks.

Thanks very much. Let me just close by saying thank you, to all of our approximately 1,300 professionals around the world. It's their ability to help our clients achieve operational excellence and faster growth, especially through -- as we've discussed, digital transformation continues to be one of the key reasons for our strong performance. And I'd like to thank all of you on the call for your continued support and confidence in our firm. Have a great day.

And that does conclude today's conference. We thank you for your participation. You may now disconnect.